Measuring Price Effects of Concentration in Mixed Oligopoly: An Application to the Swedish Beef-slaughter Industry

Empirical studies of market power focus exclusively on industries with private firms. Yet, it is not uncommon to find private firms competing with public firms or cooperatives (coops) within the same market. We develop an empirical procedure for measuring market-power and cost-efficiency effects of concentration in mixed oligopoly consisting of coops and investment-owned firms (IOF) and apply the procedure to the Swedish beef-slaughter industry. We find that the cost-efficiency effect of coop concentration more than offset its market power effect, resulting lower beef prices. IOFs are found to be price-takers in both cattle procurement and beef sales.      

Financial determinants of systematic risk in real estate investment trusts

Financial theory and empirical evidence suggest that a firm's systematic, or market related, risk is related to its financial conditions. This study empirically investigates the financial determinants of systematic risk for Real Estate Investment Trusts (REITs). The study is an examination of sample of 32 REITs for the period 1976–1978. The results indicate that systematic risk varies directly with financial leverage, business risk, and advisor fee. The explanatory power of the relationship between systematic risk and financial variables exceeds that of previous studies wherein firms were pooled across industry groups. The higher explanatory power observed even with limited data suggests that better estimates of coefficients of financial determinants of systematic risk may be obtained through analysis conducted on an industry by industry basis. Furthermore, such industry-specific analysis provides useful results to practicing financial managers in their financial policy considerations. With the knowledge of how the financial decisions affect the firm's systematic risk, a manager may be able to manipulate those variables so as to reduce the systematic risk for his or her firm and thus increase the market value of the firm's securities.     

Differences between Presidents' and Sales Managers' Perceptions of the Industry Environment and Firm Strategy in Small Industrial Firms: Relationship to Performance Satisfaction

The industrial sales force is the primary source of information about the competitive environment. Differences of perceptions of that environment between the national sales manager and the firm president in small industrial firms may reflect inadequate environmental information input into strategic decision-making. The sales force is a major element in implementation of strategy and differences between perceptions of firm strategy may reflect inadequate coordination and communication between the chief strategy decision-maker and the manager who is responsible for implementing that strategy in the market place. It would be expected that these differences in perceptions would impact negatively strategy formulation and execution resulting in unsatisfactory firm performance. This study surveyed the environmental and strategy perceptions of presidents and national sales managers in small to medium-sized industrial firms as well as presidents' satisfaction with firm profitability and marketing/sales effectiveness. The average absolute difference in environment perceptions has a negative relationship with satisfaction with profit. The average absolute difference in strategy perceptions has a negative relationship with marketing/sales effectiveness. This latter relationship is especially strong in an environment high in capital spending variation and for larger firms. The authors suggest implications for managers based on these results.     

我国出口企业的“生产率悖论”及其解释

本文用1998-2007年的中国工业企业数据,选取近300万家企业,分20个行业检验了我国企业出口与生产率的关系,结果显示:只供应国内市场的企业生产率反而高于出口企业;并且企业出口与生产率呈现负相关关系,即生产率越低的企业出口越多。此结论与新-新贸易理论的结论相悖,我们称之为生产率悖论。进一步检验还发现,企业规模是影响出口的主要因素,而出口贸易对于企业生产率的影响是不显著的。笔者认为,导致我国出口企业出现生产率悖论的原因可能在于我国加工贸易较多,且占据了出口贸易的主体。     

Supply Chains,Global Financial Shocks and Firm Behaviour towards Liquidity Needs

Driven by the increasingly important role of supply chains in global production, this paper studies empirical association between global credit‐market shocks and firm behaviour towards liquidity needs across countries and industries. Focusing on the adjustment of working‐capital financing, we find two pieces of supporting evidence from international firm‐level panel data covering the period 2002:I–2012:IV. First, for industries where specific investment in the input supplier–customer relationship is large, firms are more exposed to credit‐market shocks. We find that measures of global credit‐market shocks are negatively associated with trade receivables, trade payables and inventories, conditional on the level of contract intensity in the industries where firms operate. Second, firms in emerging markets are more vulnerable to credit‐market shocks than are firms in developed countries. We are also able to verify the economic significance of sales growth, operating cash flows, cash stock and firm size in the overall adjustment. Our findings highlight the importance of balance‐sheet contagion along supply chains during the 2007–09 global financial crisis.     

Market Incentives for Business Innovation: Results from Canada

Are more competitive industries more innovative? Empirical investigation into various theories of innovation in industrial organization, agency theory, or endogenous growth, make diverse predictions with respect to this long-standing open question in economics. In this paper, we investigate the empirical relationship between competition intensity and firm innovation using a new micro-database containing a large sample of Canadian manufacturing enterprises over the 2000–05 period. Using three different measures of competition intensity, we find evidence that competition intensity is positively related to firm-level expenditures on research and development (R&D) in Canadian manufacturing industries. However, we also find that this relationship is dampened when more firms are further from the technological frontier of their industry. Nevertheless, the results provide evidence for a Schumpeterian interpretation, whereby market power can increase business incentives for innovation when many firms are technological laggards.     

Market delimitation,firm survival and growth in service industries

This article focuses on the effect of both firm survival and market delimitation on stochastic growth behaviour in the realm of service industries. Two samples of firms were selected for the study, one of them representing the surviving firm population in the tourism industry and the other one representing the firm total. The activity of firms was used for measuring the influence of market delimitation. Stochastic growth behaviour is found to hold for the sector as a whole, whereas it does not do so for the population of surviving firms. Market delimitation is also observed to influence growth behaviour, but only when combined with firm survival.     

Endogenous Market Structures in the Presence of a Socially Responsible Firm

We consider the endogenous selection of strategic contracts in an asymmetric duopoly with substitutable goods. the duopoly comprises a typical managerial firm with a sales delegation and a socially responsible firm (CSR firm) with a linear combination of social welfare and quantity as its managerial delegation contract. In particular, we examine how the equilibrium market structure changes from the case wthere both firms adopt sales delegation contracts to the case wthere one of the firms becomes a CSR firm, after the owners of the firms select their strategic contracts. We show that two market structures that are asymmetric with respect to their strategic contracts can become equilibrium market structures under the pure strategic contract class. Furthermore, we consider a unique mixed strategy equilibrium to examine how the risk domination between the two asymmetric equilibrium market structures affects equilibrium selection. there, we find that the competition wthere the firm with the sales delegation and the CSR firm have a price contract and a quantity contract, respectively, risk-dominates the competition wthere the firms have a quantity contract and a price contract, respectively. Finally, by deriving the order of social welfare among the four subgames, we show that the social incentive does not coincide with the private incentive in the robust equilibrium with respect to risk domination in the endogenous selection game of the strategic contracts of the asymmetric duopoly with the firm with a sales delegation and the CSR firm.     

Are entrepreneurs special? Evidence from board appointments

As shown in previous studies, founder-led firms perform better than those run by professional managers. Does this reflect the special relation of founders to their firms or do entrepreneurs possess attributes and experiences that are valuable even at firms not founded by them? Drawing on the resource-based view of the firm, we study this question by evaluating the effect of entrepreneurs who serve as outside directors of other firms. We find that the stock market reacts positively to appointments of outside entrepreneur directors and that firms with these directors have higher long-term value as measured by Tobin's q. Entrepreneur directors are also associated with increased R&D investment and higher sales growth, and their effect on firm value is larger among firms in R&D-intensive and competitive industries. We conclude that outside entrepreneur directors enhance firm value through their propensity to take risk and their ability to anticipate demand patterns and create new markets.     

Understanding Complexity: the Curvilinear Relationship Between Environmental Performance and Firm Performance

The nature of the relationship between environmental performance (EP) and firm performance (FP) of corporations is a long standing and contentious issue in the literature. This study is intended to advance this debate by arguing for the existence of curvilinear relationship and empirically testing the same using survey data on UK manufacturing firms. FP is captured in terms of growth in sales and market share. Our results show evidence for a quadratic relationship—as firms improve their EP, they seem to achieve much higher levels of FP. These results are consistent with the resource-based view of a firm; as firms engage in EP activities, they are able to gain inimitable knowledge that helps in further learning to further improve performance. Based on our results, we suggest that new studies focus on strategies to extend the period of increasing returns and maximizing the benefits of the positive association between EP and FP.     

Exchange rate exposure

In this paper we examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of publicly listed firms in a sample of eight (non-US) industrialized and emerging markets. We find that exchange rate movements do matter for a significant fraction of firms, though which firms are affected and the direction of exposure depends on the specific exchange rate and varies over time, suggesting that firms dynamically adjust their behavior in response to exchange rate risk. Exposure is correlated with firm size, multinational status, foreign sales, international assets, and competitiveness and trade at the industry level.     

Antecedents of growth through mergers and acquisitions: Empirical results from Belgium

This paper empirically investigates the antecedents of growth through mergers and acquisitions (M&As) in a typical continental European country, Belgium. The article reports on a study using data on 484 private and listed bidders engaging in 990 M&As during 1997-2007, and matches this sample with companies that did not pursue any external growth. By analyzing firm characteristics, industry, and aggregate financial market variables, the study can also discern the motives that are important in the decision to acquire. The results show that neither the firm's cash position nor its cash-generating abilities influence its choice to grow externally. Yet, intangible assets affect the M&A decision positively, whereas ownership concentration and bank loans have a negative effect. In industries where incumbents are operating at a lower scale and in more highly concentrated industries, the odds of firms participating in M&As are larger. Industry deregulation, industry growth, and financial market conditions have no influence. These findings are largely comparable across listed and private firms. Yet, the data do reveal that the operating scale of industry incumbents and industry concentration matter only in horizontal and domestic takeover decisions.     

Do Credible Firms Perform Better in Emerging Markets? Evidence from China

Prior research suggests that corporate credibility is associated with firm financial performance in developed countries. This article examines whether corporate credibility is related to firm performance using Economic Observer’s rating of corporate credibility in China, the largest emerging market in the world. Based on a four-stage valuation model, we find that more reputable and credible firms outperform those with low ratings by almost 20% in 3-year stock returns and have better 3-year net profit margins, return on equity, and sales growth. This study is the first to directly examine the relationship between corporate credibility and firm performance in emerging markets such as China, and our results confirm that firms with high credibility exhibit better financial and market performance at least in the following 3 years.     

Market Orientation and Firm Value

Several studies in the market orientation literature demonstrate a positive relationship between a market orientation and firm performance. However, the mechanisms of this relationship have yet to be explored in detail. This article addresses such a gap by proposing a conceptual model that links market orientation to wealth creation in firms. The model posits that a market orientation guides investment in market-based assets that may be deployed to create customer value. The realisation of customer value helps to both capture and retain customers. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a market-oriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm. This model is used to describe the creation of value in the Major Business Division of BT, a large information technology service company. Recent success in this Division of BT is attributed to the creation of a market orientation and customer value-based strategy and processes. The experience of BT provides a clear illustration of how a market oriented firm creates value for both customers and shareholders.     

Firm-level volatility and exports

This paper shows that the share of exports in the total sales of a firm has a positive and substantial impact on the volatility of its sales. Decomposing the volatility of sales of exporters between their domestic and export markets, I show using an identification strategy based on a firm-specific geographical instrument that firms with a larger export share have more volatile domestic sales and less volatile exports. These empirical patterns can be explained using a model in which firms face market-specific shocks and short-run convex costs of production. In such a framework, firms react to a shock in one market by adjusting their sales in the other market. I point to strong evidence that output variations on the domestic and export market are negatively correlated at the firm level. This result casts doubts on the standard hypothesis that firms face constant marginal costs and maximize profits on their different markets independently of each other. Furthermore, it points to the caveat that sales volatility on a particular market only gives limited information about the size of shocks on that market.     

The Effects of Firm Size and Industry on Corporate Giving

Recent downward trends in corporate giving have renewed interest in the factors that shape corporate philanthropy. This paper examines the relationships between charitable contributions, firm size and industry. Improvements over previous studies include an IRS data base that covers a much broader range of firm sizes and industries as compared to previous studies and estimation using an instrumental variable technique that explicitly addresses potential simultaneity between charitable contributions and profitability. Important findings provide evidence of a cubic relationship between charitable giving and firm size and evidence of strong industry effects. The plus-minus-plus regression coefficient sign pattern for the cubic firm size model suggests that small and large firms give more relative to total receipts with lower giving ratios among medium size firms. One interpretation for this finding is that small firms are close to the communities they serve while high visibility creates a need for large firm philanthropy. Strong industry effects provide evidence of inter-industry differences in giving culture and/or different public relations requirements across industries. Christie H. Amato (Ph.D., University of Alabama) is professor of marketing at the Belk College of Business Administration, University of North Carolina, Charlotte. Dr. Amato's research interests lie in the area of strategic marketing, productivity, quality of life and ethics. She has published articles in top marketing journals including: Journal of Marketing Research, Journal of the Academy of Marketing Science, Journal of Retailing, Journal of Advertising and Journal of Business Research. Louis H. Amato (Ph.D., University of South Carolina) is professor of economics at the Belk College of Business Administration, University of North Carolina-Charlotte. Dr.␣Amato's research interests lie in the areas of market structure and profitability, productivity, quality of life and ethics. He has published articles in top journals including Southern Economic Journal, Review of Industrial Organization, and Quarterly Journal of Business and Economics.     

Corporate ownership and control contestability in emerging markets: The case of Colombia

This study examines the structure of voting control and blockholders’ contestability for a sample of 233 non-financial listed firms in Colombia during 1996–2004. Corporate control is characterized by high ownership concentration and blockholder power, which implies low separation ratios between cash flow rights and voting rights. On average the separation ratios for the largest voting block is 0.95, while that for the fourth largest shareholder is 0.75. Corporate control is privately biased when there is direct monitoring of firm management by controlling owners. Regression results show that a more equal distribution of equity among large blockholders has a positive effect on firm value. Contestability matters most when firm shares are liquid and actively traded on the stock market. This finding is reinforced when the probability that the largest block can form a winning coalition decreases and performance variables, such as market to sales ratio and return on equity, are included in the estimating equations as substitutes for firm value. In addition, our estimations provide evidence that diversion of rents (tunneling) is limited by blockholders’ contestability.     

Implications of marketing capability and research and development intensity on firm default risk

Marketing capability and research and development intensity are firm resources used to increase firm performance and reduce investor risk. This study aims to link marketing capability and research and development intensity, and their interaction to firm default risk. This study is the first to examine marketing capability and research and development intensity regarding their influences on firm default vulnerability and to demonstrate how marketing capability may strengthen research and development intensities’ power on risk reduction. The results reveal a U-shaped relationship between research and development intensity and firm default risk, while marketing capability’s impact is unidirectional. Further, marketing capability strongly moderates the relationship between research and development intensity and firm default risk. For low marketing capability firms, the U-shaped pattern is more significant. For high marketing capability firms, the pattern is not salient and the risk reduction power of research and development intensity is stronger. This research provides useful implications for marketing theories, as well as business practice.